World's Second Largest Burger Player To Give Potential Returns of Upto 35.51%, Says Prabhudas Liladhar

Burger King brand company Restaurant Brands Asia Limited is recommended stock to buy a leading brokerage firm Prabhudas Liladhar. The brokerage has estimated that the stock price of this quick service restaurant (QSR) burger franchisee player will scale upto Rs 145 per share from Rs 107 per share, a growth of 35.51%. Restaurant Brands Asia's quarter 3 numbers were shared recently by the company.

Burger King revenue was up by 32.1% but it witnessed losses

As per the analyst coverage report the Restaurant Brands Asia Limited's Indian business operations were up. Gross margins expanded but company made loss. "Revenues grew by 32.1% YoY to Rs3.7 billion as estimated. Gross margins expanded by 31 basis points YoY to 66.4% while estimated was 68.3%. EBITDA grew by 45.8% YoY to Rs 478.5 million, lower than estimated Rs 480 million. Margins expanded by 122bps YoY/151bps QoQ to 12.9% , down from estimates of 13.1%. Adjusted loss stood at Rs 112.1 million in 3Q23 vs Rs 152 million in 3Q22 and estimate of Rs -140 million.

Popeye Business is operated in Indonesia whose revenue was up marginally, as per the report. Plus both the business operations saw growth in same store sales growth (SSSG). "Indonesia revenues grew by 0.7% YoY to Rs 1.6 billion. Gross margins contracted by 272 basis points YoY / 329bps QoQ to 57.2%. EBITDA Loss for 3Q23 stood at Rs 181 million vs profit of Rs 189 million in 3Q22. SSSG stood at 8.6%, average daily sales at Rs 120 k in 3Q23. Added 45 stores in 3Q23, total store count at 379. Added 72 BK Café in 3Q23, total BK Café count at 252.

Additional information

Burger King India's revenue is mixture of dine-in and delivery. For the quarter the mix was 42% and 58% of the revenue respectively. One of the ways to reach out to customers is through engagement campaigns at their stores and burger cafes. It innovative breakfast menus and campaigns helped this quarter. Plus a potent omnichannel, app helps in average daily sales, approximately 5.5 million people installed the app. The revenue through app grew by 16% during the quarter.

Valuation of Restaurant Brands Asia Limited, to buy the stock with a target price of Rs 145

Prabhudas Liladhar believes the company profit will turn around. "We believe Restaurant Brands Asia Limited's India operations are on track and should report mid-single digit pre IND AS EBIDTA with small profit in FY24 and full turnaround in FY25 given sustained customer traction and likely gains from BK Café in FY24. We believe Indonesia business will take time to turnaround given delay in post COVID recovery, business restructuring and initial losses in Popeyes (5/30 stores in FY23/FY24). We value the company at Rs 145 per share (Rs156 earlier) on SOTP basis. Maintain Accumulate."

The current market price of the stock of Restaurant Brands Asia Limited is Rs 99.40, down by 6.61 % on intraday basis. Since the IPO launch the price of the stock has fallen by 23.09%. The issue price at the time of IPO launch in December 2020, is Rs 129.25 per share. The company faced turbulent waters during the COVID times which the affected the business tremendously.

Disclaimer

The stocks have been picked from the brokerage report of Prabhudas Liladhar, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.